Question: What will happen next year to individuals who do not have health insurance as required by the Affordable Care Act?

Answer: Not a heck of a lot.  The so-called “individual shared responsibility provision” of the Affordable Care Act provides that (subject to certain exceptions) if individuals don’t have “minimum essential health coverage” as defined in the Act, they will be subject to penalties starting at $95 a year in 2014, with higher amounts as income goes up.  The minimum penalties go up to $325 in 2015 and $695 in 2016.  However, these penalties can only be assessed by the IRS as an offset to any refund or other amount due to the taxpayer. So if the individual does not have a refund coming, there is no effective penalty.  Moreover, those who do have a refund will simply get a lower one and may not view the “shared responsibility payment” as a payment at all.  This is likely going to work as an additional incentive for individuals not covered by employer-provided  insurance to go bare, especially in light of the large premium increases and enrollment difficulties that have recently been reported.  Therefore, hospitals and physicians should be prepared for a substantial uptick in uninsured patients, at least for the next couple years.

The IRS has published a useful summary of the individual shared responsibility provision on its website (which as of this morning was working fine, unlike that of HHS).